SAN JOSE, Calif., July 29 /PRNewswire/ — Most small business owners looking to sell and entrepreneurs looking to buy know that although there are many businesses out there, it is the financing that is holding up most deals. Seller financing could be the solution that gets everyone what they are looking for.
Seller financing involves a seller helping finance the sale of the business by taking back a second note on the business. “Seller financing differs from a traditional SBA loan because the seller essentially extends credit to the buyer against the purchase price of the business,” stated Ron Hottes, president of the California Association of Business Brokers (CABB — a professional, non-profit trade association) and president of Business Team LA and Business Team SoCal. “Seller financing is often misunderstood,but it can be the best way to sell a business given the current economy.”

Hottes says that there are benefits for business owners that consider seller financing:

– Faster sale. Seller financing can be an attractive offer for buyers which means that sellers can sell their business fast and at a higher price.

– Flexibility. Seller financing enables the seller to create a payment schedule, interest rates and loan period that fit their personal needs.

– Tax breaks. Taking a note for part of the purchase price of a business may allow sellers a tax break. The seller can defer some of the tax due on the sale of the business until full payment is received which could be several years.

– Protections. Asking the new owner to keep the seller informed by doing things like submitting monthly profit and loss statements and inventory levels with their monthly payment can be in the sale contract. This allows the seller to keep track of the business and step in to offer advice or help if they see a problem. Hottes also recommends that business owners work with a CABB Certified Business Broker when considering selling their business. “A certified business broker can go over the benefits of seller financing and connectsellers with serious buyers,” Hottes stated. “They will help develop a deal that is fair to both the buyer and seller.”

SOURCE California Association of Business Brokers